Costa Rica: Vacation Rentals Must Pay Taxes

The new law against tax fraud obliges anyone renting houses and flats for less than 30 days to register and pay sales and income taxes.

Friday, January 6, 2017

Services of renting houses, apartments and condominiums for periods less of than one month must pay sales and income taxes, and those who carry out such activities must register as taxpayers of the two taxes, in order to not be subject to fines.

See: "11% of Tourists Prefer Houses to Hotels"

Nacion.com reports that "...Alan Saborio, managing partner at Deloitte, explained that neither vacation nor shops rooms rentals are charged sales tax. However, the Law of General Sales Tax, states in Article 1, that rentals of less than a month are subject to tax, but there was a vacuum of interpretation and the rule was not being complied with. In the new law against tax evasion this provision has been clarified and the obligation to be registered is established, said Saborio. He added that clarification has been given to the concept of houses used for transitional stays along with the definition of possible action taken by the Ministry of Finance against those who rent per week, day or for periods defined as less than one month."

The union of hotels "... celebrated these clarifications in law and possible actions by the Ministry of Finance. 'It represents an achievement for the Costa Rican Chamber of Hotels, because throughout 2016, its president Gustavo Araya, upheld a constant struggle with the aim of defining the conditions for equal competition within the sector known as tourist accommodation," said the chamber in a statement."

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More on this topic

Costa Rica: Tax on Holiday Rentals

August 2014

A draft anti tax avoidance law to be discussed by the Assembly in Costa Rica clarifies the obligation to pay sales tax on homes rented out for less than a month.

Sales tax on holiday houses rented to tourists is already covered in the General Sales Tax Act, but in practice "... this obligation is often breached by owners," affecting the formal hotel sector, which has to pay the same tax.

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The trend of renting out non-hotel accommodation for a few days is global, and it will grow even more in the next 5 years, so regulating it will be a better solution than banning it.

In Central America Panama is the country where the phenomenon of Holiday Rentals shows the highest growth, despite a law prohibiting it.

Boom in Vacation Rentals Hurts Hotels

April 2013

Hotel owners are complaining of unfair competition from apartment owners who rent their properties for tourism at low prices.

Hoteliers in Panama believe that competition is not fair because these property owners do not pay tourist tax and work illegally.

Although there is a law that prohibits renting apartments to tourists for less than 45 days and which is punishable with a fine $50,000 for repeat offenders, apartment owners who have failed to sell their properties see in the vacation rentals a way to recover their investment.

Hotels Versus Homestays and Renting Condos

March 2013

According to the Chamber of Costa Rican Hotels, homeowners and private condominiums represent unfair competition in accommodation services for tourists.

According to Flora Ayub, director of the Chamber, the cost of staying in a house or condominium is lower than in a hotel, because they do not have to pay for items such as income tax, insurance or patents.

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